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Montreal, Maine & Atlantic Railway had only $25-million in third-party liability insurance before the derailment and explosion in Lac-Mégantic, Que., in July, 2013. (PETER POWER/THE GLOBE AND MAIL)
Montreal, Maine & Atlantic Railway had only $25-million in third-party liability insurance before the derailment and explosion in Lac-Mégantic, Que., in July, 2013. (PETER POWER/THE GLOBE AND MAIL)

Railways must be ready to pay for major accidents, Transport Minister says Add to ...

Railways should be better prepared to cover the financial costs associated with catastrophic accidents such as the derailment in Lac-Mégantic, Que., Transport Minister Lisa Raitt says.

Speaking at a Canadian Club luncheon in Ottawa, Ms. Raitt said the railway that owned the train that derailed did not have enough insurance at the time of the accident, which killed 47 people. The crude oil that leaked from the train also contaminated the soil and water system in Lac-Mégantic, requiring a massive clean-up that is expected to cost more than $200-million.

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Montreal, Maine & Atlantic Railway Inc. had only $25-million in third-party liability insurance, an amount that had been approved by a federal agency before the accident. Ms. Raitt said the federal government is looking to strengthen the transportation insurance regime “to make sure that sufficient resources are available to compensate victims, to pay for the cleanup costs, and fundamentally to protect taxpayers.”

Ottawa has been under pressure to introduce new rules on rail safety since the Lac-Mégantic disaster. The trains was carrying crude oil from the Bakken formation in North Dakota, which officials in the United States have since warned may be more volatile than other kinds of crude.

A U.S. State Department report on the Keystone XL pipeline proposal released last week showed that rail shipments of crude from North Dakota increased from less than 100,000 barrels per day in October, 2010, to about 750,000 barrels per day in October, 2013. Shipments of Western Canadian crude have also increased, but less dramatically, the report said.

Ms. Raitt said she is aware of the sudden increase in the movement of crude oil by rail, adding that it makes looking at rail safety regulations more urgent. “With this massive increase and growth in the volume of oil being shipped by rail through cities and towns, the likelihood of accidents does increase,” she said.

The Federation of Canadian Municipalities has suggested the federal government consider a fund that would pool the industry’s insurance resources so that more money is available if a catastrophic accident occurs.

Last week, rail advisory groups submitted their recommendations for new emergency protocols for crude and other flammables and for the classification of dangerous goods and changes to the rules governing tank cars that are used to carry crude oil by rail.

Ms. Raitt said all the reports would be made public, likely later this week.

She told The Globe and Mail in December that she expects a new emergency response assistance plan (ERAP) to be in place for crude oil by the middle of 2014. ERAPs can require shippers to ensure foam and emergency responders are available in case an accident occurs.

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